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Machine Learning: The Missing Link in Bringing B2B Payments Up to Speed

By Paul Christensen, CEO at Previse

Despite the effects of the late payments problem being well documented, many businesses still fall behind when it comes to paying suppliers on time. This is in stark contrast to the world of B2C payments, where typically, financial exchange not only coincides with delivery of value, but this process is seeing constant improvement thanks to technology. As such, there is a disconnect between the progress being made in the world of B2C payments, and that of B2B.

Paul Christensen

So, why is it so important that B2B strives towards the same instantaneous settlement that exists when a customer walks into Starbucks and make a purchase? Here, we look at the impact that late payments between businesses is having on the wider economy, and how technology can be harnessed to address the problem.  

The current landscape 

At present, payments in the B2B sphere are hampered by archaic processes. In the UK, this process starts with the need for invoice approval, after which the payment will not be made until payment terms have been reached and finally, transfer of funds, which can take an additional three days. The entire process from the delivery of goods and the receipt of payment can take months in total. 

In the US, the situation is even worse. B2B payments are often made by cheque, which needs to be received and then cashed, adding more days to the overall payment time. All-in-all, the way B2B payments are conducted is highly inefficient and this has serious effects. 

All the while that steps are not being taken to remedy this ever-growing issue, vast amounts of capital are held by bigger business and not being released to SMEs. This inevitably hits their liquidity and capacity to invest in growth. In fact, late payments cause 50,000 SMEs to go out of business every year in Britain. For those that are more secure, they still need to hold onto cash reserves, to cover themselves in the instance of payments being received late. 

there is a disconnect between the progress being made in the world of B2C payments, and that of B2B.

Steps in the right directions

The good news is that the issue of B2B late payments is entirely remediable.  While organisations such as Mastercard and Visa are beginning to address the problem and infrastructure like Faster Payments are steps in the right direction, these solutions are focussed on accelerating the speed at which payment transactions are made. However, while solutions such as these are undoubtedly a welcome step in the battle against late payments, to truly overcome the issue a holistic solution that streamlines all elements of the payments process is needed. Tackling invoice approval in the long chain of steps in the B2B payments process is essential to unlocking instantaneous payment, akin to those that are the norm in the B2C world. 

Filling in the gaps 

Machine learning, when analysing the right data, can provide accurate assessment of whether an invoice will be paid or not. Many companies will log their payments and accounts using an ERP system, representing a valuable source of data through which machine learning is able to analyse and return an assessment as to which invoices will be paid. When AI predicts what will be – or won’t be –paid, approval for all invoices which will be paid can be instantly granted.

late payments cause 50,000 SMEs to go out of business every year in Britain.

This makes it possible for invoices to be approved and payments executed at the same time as the receipt of goods (or very close to it). With enough payment data at our disposal and the ability of machine learning to accurately analyse it, the longest part of the payment cycle – the 60-90 day wait for payment to occur – can be completely cut out of the process. 

While we have seen widespread technological change in the B2C payments world, the B2B sphere continues to lag behind. The solution, however, is within reach. We have the data at our disposal to enable technology-driven solutions to B2B payments processes. What is needed now is to harness the information we have at our fingertips to end late payments between businesses for good.

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